RM1,500 minimum wage will hurt plantation industry, says Sime Darby

Malaysia's plantation industry is heavily dependant on cheap, foreign labour. — Reuters pic
Malaysia's plantation industry is heavily dependant on cheap, foreign labour. — Reuters pic

PETALING JAYA, May 31 — The world’s largest oil palm company by planted area, Sime Darby Plantation Bhd, expects the proposed increase of minimum wage to RM1,500 will have adverse financial consequences for the plantation industry.

Executive Deputy Chairman and Managing Director Tan Sri Mohd Bakke Salleh said the proposal, if implemented, would raise labour cost’s contribution to total production cost to 35 per cent from 26 per cent currently.

“This translates into an additional cost of RM185 per tonne,” he told a media briefing on the company’s third-quarter financial performance here today.

He said Sime Darby Plantation and other players in the industry are currently working on an application to submit to the government to address the concern on minimum wage.

“(If implemented) I hope this (RM1,500 minimum wage) will not be made compulsory or it could have adverse financial consequences,” he added.

Pakatan Harapan in its 14th General Election manifesto pledges to increase minimum wage to RM1,500.

Mohd Bakke said another area of concern for Sime Darby was the pledge to reduce foreign workers.

He said plantation is a labour intensive industry and foreign workers made up 70 per cent of the total workforce in the industry.

Therefore, any disruption to the labour force would have a significant impact on the industry, he said.

“Even though Sime Darby Plantation has achieved 85 per cent progress on automation but you can only do so much with mechanisation,” he added.

On other developments, Sime Darby Plantation is optimistic of ramping up its fresh fruit bunches production in Liberia to around 18-28 tonnes per hectare from 7.0 tonnes per hectare currently.

He said with good water management initiative and sound agronomy practices, the company was confident of increasing production yield.

“Our plant now is quite young. When it achieves its prime period of between nine and 15 years of age, we will get the best of them,” he said.

Meanwhile, on the company’s plan to sell its shareholding in New Britain Palm Oil Ltd (NBPOL), Mohd Bakke said the company was still keen to reduce its ownership in NBPOL to 60 per cent from 100 per cent currently.

However, he said the company was being selective on the potential buyer as it preferred a long-term partner.

Headquartered in Port Moresby, Papua New Guinea, NBPOL is a large scale integrated, industrial producer of sustainable palm oil in Australasia with over 83,000 hectares (ha) of planted oil palm plantations, 10,000ha under preparation for oil palm, over 5,600ha of sugar cane, 9,000ha of grazing pasture and twelve oil mills. — Bernama

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